The Youth Entrepreneurship Ecosystem Requires Shifting the Needle at Scale

Youth entrepreneurship is key to reducing unemployment, yet current efforts are not shifting the needle at scale. The Anglo American Foundation is redefining the conversation by championing overlooked ‘self-starter’ entrepreneurs in South Africa’s townships and building pathways to fair work through value chain support, finance models and national advocacy.

Entrepreneurs as catalysts for change

Entrepreneurs are increasingly recognised as a vital catalyst in the success of transforming markets – they are a critical lever to reducing unemployment. Similarly, youth entrepreneurs are an important demographic to achieving this transformation. We are also seeing increased funding towards youth entrepreneurship which is now the fastest growing and second most supported development portfolio. Yet we are consistently seeing that while many of these entrepreneurship programmes are perhaps successful at the individual entrepreneur-level, the ecosystem has not been able to shift the needle at the scale required.

Acknowledging that jobs and livelihoods are some of the most pressing needs for youth, the Anglo American Foundation transforms markets for young people through economic opportunity work aimed at ensuring that youth have access to a variety of work pathways and enhanced availability of fair work opportunities. Taking a value chain approach to existing – and new – green markets; as well as proving viable finance models to support the ‘missing middle’ for Micro, Small and Medium Enterprises (MSMEs) are at the core of this strategy.

Gaining a deeper understanding of youth entrepreneurship

The Anglo American Foundation undertook a review of eighteen pilot grants in Peru and South Africa as part of strategy development in 2022 and 2023. These were ‘Learning by Doing’ grants, which were used to test the Foundation’s initial hypotheses through practical on-the-ground solutions, and to evaluate stakeholder credibility in a low-risk environment.

This review generated valuable lessons that emerged across the youth entrepreneurship space, including that:

  • Programmes are targeting entrepreneurs too late in the journey. Because the system doesn’t engage youth early enough or consistently enough, few are visible or ready for support when it arrives.
  • Funding goes towards too many short-term entrepreneurship programmes without sufficient focus on long-term investment.
  • Entrepreneurship is not attractive to young people, and there is a mismatch between education and livelihoods.
  • There is a disconnect from key allies (including low visibility of successful entrepreneurs) who could play a vital role in building the pipeline of entrepreneurs.

One of the most important learnings that emerged was about the critical role of the ‘informal youth entrepreneur’.

“Most young people [in South Africa] aren’t opportunity entrepreneurs—they’re hustling for survival. They and their work needs to be recognised and supported as such.”
Michael Mapstone, CEO, Anglo American Foundation

Recognising a need to actively shift the narrative

These findings and lessons led to a re-think about the concept of youth entrepreneurship; and where and how impact would be possible. This process deliberately started with ‘recognising’ a need to actively shift the narrative around this overlooked segment of ‘informal’ or ‘hustler’ youth entrepreneurs. It is about amplifying the critical existence of this segment in the complex and massive market ecosystem in South Africa. It is about acknowledging them as the critical drivers of our work across our value chains and finance models. Harambee uses the word ‘self-employment2 ’ as an excellent example of trying to change this narrative.

Using this definition as a starting point, alongside the Foundation’s partner, TechnoServe, market research was recently conducted to delve into the journey of a typical township entrepreneur in South Africa. This research3 identified that 20-25% of youth in South Africa’s townships fall into what TechnoServe is calling the ‘self-starter’ category. These self-starters earn income through informal activities such as street vending and are also testing entrepreneurial ideas; most typically without formally employing others.

Zooming in on self-starters

Self-starters are an important category in the TechnoServe ‘four-stage entrepreneurship journey’ spectrum. Self-starters bridge the space between being unemployed and building an early-stage business – they test entrepreneurial ideas, typically without employing others.

Figure 1: TechnoServe ‘four-stage entrepreneurship journey’ spectrum

Three categories of self-starters have been identified:

  • Side-hustlers, who engage in multiple income-generating activities, switching between them quickly. They focus on short-term opportunities, and generate up to R1,500 profit per month.
  • Survivalists are solo entrepreneurs running seasonal, opportunistic ventures, sometimes earning approximately R2,500 profit per month. Their focus is on ‘getting by’ rather than building long-term sustainability.
  • Builders have typically been operating informally for more than two years, and are earning around R5,000 profit per month. They have a consistent primary customer base and are focused on growing a sustainable business.

While further research is needed on the shift between being unemployed and becoming a self-starter; and transitioning from being a self-starter to an early-stage business, these categories have served as an important starting point for enhancing our recognition of ‘informal youth entrepreneurs.’

More support needed for self-starters

It is clear that more support is needed for self-starter entrepreneurs. Harambee, a key player in the youth entrepreneurship space believes that support to this sector could reduce unemployment by up to 6% in South Africa4. But what does this support look like? Practical ways in which the Anglo American Foundation provides support for self-starters include:

  • Continually striving to expand our understanding of self-starters by using innovative artificial intelligence (AI) methods to be able to empirically verify and understand the experiences of workers so that we can quantify and define the value of the work of this segment. We are also using this knowledge to establish what ‘fair’ work means in this context, and how we can move people into ‘fairer’ work.
  • Deepening support to self-starters across our value chains and finance models through targeted business development training and mentorship while driving the concept of ‘fair’ work. Embedding mental wellbeing is another critical element of our business development training and mentorship.
  • Amplifying the importance and value of this segment as a pathway to fair work for youth. This means sharing our learnings, successes and failures regularly with the youth employment and entrepreneurship space in South Africa.

In addition, we recognise the urgent and important need for urgent national advocacy about self-starters, while there is also a need to gain a better understanding about which self-starter initiatives exist, and which ones are working and scalable; and identifying the most effective advocacy levers for influencing the national agenda around self-starters.

Ecosystem mobilisation through partnership

Successful advocacy can only be achieved through ecosystem mobilisation that is based on practical experience, from funders, partners and experts in the sector. The Anglo American Foundation’s partnership with IPASA to develop, implement and run a youth entrepreneurship funder support initiative is a practical example of ecosystem building to support advocacy for (early) youth entrepreneurship programmes. This initiative incorporates knowledge sharing, collaborative action and advocacy. We are calling on other funders to partner with us on this vital journey!

 

This article was published on Independent Philanthropy Association South Africa
(IPASA)’s website.